After Closing Trial Balance

Closing The Books

Prepare After Closing Trial Balance

After you prepare your Adjusted Trial Balance we transfer these balances to our After Closing Trial Balance Worksheet.

Entries from our Adjusted Trial Balance Worksheet

We then enter our closing entries and add or subtract the debit and credit amounts to arrive at our After Closing Trial Balance amounts.

Shabby Computer Systems After Closing Trial Balance Worksheet December 31, xxxx


Account Name / Description	Adjusted Trial Balance		Closing Entries				After ClosingTrial Balance
	Debit	Credit	Debit	Ref	Credit	Ref	Debit	Credit
Balance Sheet Accounts
Cash	5260						5260
Accounts Receivable	24800						24800
Office Supplies Inventory	300						300
Prepaid Insurance
Inventory for Resale	8000						8000
Truck	12400						12400
Accounts Payable		1000						1000
Other Accruals		500						500
Shabby Computer Systems, Capital		22100	24000	a	42160	p		40260

Shabby Computer Systems, Drawings	24000				24000	a	0	0

Total Balance Sheet Accounts	74760	32600					50760	50760

Revenue & Expense Accounts
Consulting Services		50000	50000	b			0	0
Computer Sales		100000	100000	c			0	0
Cost of Goods Sold-Computers	72500				72500	d	0	0
Purchases
Rent Expense	6000				6000	e	0	0
Utilities Expense	4800				4800	f	0	0
Office Supplies	1200				1200	g	0	0
Insurance Expense	6000				6000	h	0	0
Vehicle Operation Expense	3600				3600	i	0	0
Maintenance & Repairs	2900				2900	j	0	0
Depreciation Expense	3100				3100	k	0	0
Bad Debt Expense	1000				1000	l	0	0
Bank Charges	240				240	m	0	0
Advertising Expense	4250				4250	n	0	0
Professional Fees Expense	2250				2250	o	0	0

Total Revenue/Expense Accounts	107840	150000					0	0

Income Summary					50000	b
					100000	c
			72500	d
			6000	e
			4800	f
			1200	g
			6000	h
			3600	i
			2900	j
			3100	k
			1000	l
			240	m
			4250	n
			2250	o

Balance Of Income Summary Account After Closing Revenue and Expense Accounts And Prior To Transferring Profit/Loss
Total Debits and Credits			107840		150000
Income Summary Balance-Credit Balance of 42160

Transfer Income Summary Balance-Profit/Loss			42160	p

Total Income Summary			150000		150000


Total All Accounts	182600	182600	324000		324000		50760	50760

Steps In Closing Our Books

Close Drawing Account to Capital Account
See Entry (a)
Close All Revenue and Expense Accounts To Income Summary Account
See Entries (b) thru (o)
Close Income Summary Account to Capital Account
See Entry (p)

Calculate our After Closing Trial Balance Amounts. This column is a calculated by taking the balance in our Adjusted Trial Balance Column and adding or subtracting the debit and/or credit closing entry adjustments in our Closing Entry Column to arrive at our After Closing Trial Balance Amount.

Click on the Reference Number (Ref) in the After Closing Trial Balance Worksheet for an explanation of the closing entry.

Notice that all the revenue accounts are debited and all the expense accounts are credited in order to zero out their balances with the offsetting debit or credit entry to the temporary Income Summary Account. This account is then closed (transferred) to the Capital Account.

Closing Entries

Let's look at our definition of closing entries. Closing Entries-Entries made at the end of a period (usually year) to reduce the "temporary" account balances (revenue, expenses, and drawing accounts) to zero and transfer the summarized balances to the capital account All our Income Statement Accounts are going to be set to zero (closed) and the net balance (which is actually the profit/loss) transferred to the Capital Account in the Balance Sheet Accounts.

In addition the balance of the Owner's Drawing account is also transferred (closed) to the Capital Account in the Balance Sheet Accounts.

A quick refresher about our revenue, expenses, and draw accounts.

Revenue (Income), Expenses, and Draws

Revenues, expenses, and draws are sub categories of owner's equity. Think of owner's equity as a mom with three children to keep up with (I know she's only got one clinging to her leg but she left Expense and Draws at home). The kids are named Revenue, Expense, and Draws and each kid has one job that they are responsible for in order to earn their allowance. Kid Revenue is responsible for keeping track of increases in owner's equity and Kid Expense is responsible for keeping track of decreases in owner's equity resulting from business operations. Kid Draws has the job of keeping up with decreases in owner's equity resulting from owner withdrawals for living expenses and other personal expenses.

At the end of our period, we summarize all our kid's activities and transfer their balances to our Owner's Equity Capital Account (Mom).

What's Next ?

Formal Financial Statements